Firms rush to beat tax deadline

The number of private equity-backed takeovers of British firms is expected to top £5bn in the first three months of the year, as company owners rush to sell their businesses ahead of changes to the rules on capital gains tax.

The volume of deals has flourished despite the credit crunch, which has made borrowing more expensive. The final three months of last year, when £2.9bn worth of deals were done, had been the quietest quarter for buyouts since 2003, according to figures compiled by the Centre for Management Buy-Out Research at Nottingham University.

The controversial changes by the chancellor, Alistair Darling, to capital gains tax take effect from April.

Under the new regime, business owners face a flat rate of 18% capital gains tax, ending so-called "taper relief", where the tax paid on the sale of a business went down over time to as little as 10%. In the first three months of 2007, there were £3.4bn worth of deals completed.

Tony Lamb, co-head of Barclays Private Equity, which helped to put the research together, said: "UK buyout activity so far in 2008 compares well with prior years." He added: "It remains to be seen whether this will continue into the rest of the year, or whether this will prove to be a false dawn because the CGT changes have pulled forward deal flow from later in the year."

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